By Pam Martens: May 9, 2013
That shady offshore tax haven known as Ugland House in the Cayman Islands strikes again. After consuming a chunk of Jack Lew’s Senate confirmation hearing, with Senators grilling Lew on why he owned an investment housed in this offshore tax dodge while working for the Obama administration, the Cayman Islands’ address has surfaced once again in the foreclosure settlement scandal.
On April 30 of this year, just 18 days after the first wave of checks from the Federal government’s settlement of the so-called Independent Foreclosure Review began arriving in the mail – and bouncing – Citigroup Venture Capital International (CVCI), Lew’s former Ugland House investment, bought a large stake in the company that was mailing the checks, SourceHOV, parent of Rust Consulting. As reported by Naked Capitalism, the ownership stake was made despite Citigroup being one of the banks in the foreclosure settlement.
After correcting the humiliating problem of bouncing foreclosure victims’ checks, Rust Consulting came under fire yesterday for paying out 96,000 checks on behalf of claims against Goldman Sachs and Morgan Stanley with erroneous amounts that undervalued the claim. The Federal Reserve said in a statement: “The checks were for amounts that were smaller than the amounts that the Federal Reserve had specifically instructed Rust to send those borrowers.”
When Jack Lew left his executive position at Citigroup at the end of 2008 and joined Hillary Clinton’s State Department as Deputy Secretary of State, he retained his investment in CVCI, a $7 billion private equity fund. According to his January 11, 2009 financial disclosure report, his CVCI account at that point had a value of between $100,000 and $250,000. As indicated on the document below, released as part of Lew’s Senate confirmation hearing, he still owned $19,470 of this foreign hedge fund investment in calendar year 2010 while working in a high level, highly sensitive State Department post. In Lew’s confirmation hearing in February, he said he had since sold the position at a loss.
According to the General Accountability Office, Ugland House is home to 18,857 corporations. In 2009, President Obama called it either “the largest building in the world or the largest tax scam in the world.”
Lew was also challenged during his confirmation hearing on the fact that he accepted a $940,000 bonus from Citigroup in early 2009, even though the insolvent company was subsisting solely on taxpayer bailout funds at that time. Lew was Chief Operating Officer of the division that brought down the bank. According to public records, on January 14 of this year, just four days after Lew was nominated for Treasury Secretary, Citigroup completed a mortgage refinancing for Lew, changing his mortgage rate to 3.625 percent for a 30-year mortgage of $610,000 and simultaneously providing a $200,000 home equity loan at an unstated amount of interest.
Another issue for Lew in his confirmation hearing was that his employment contract with Citigroup provided a bonus guarantee based on the specific requirement that he left the bank for a “high level position with the United States government or regulatory body.” Lew achieved both requirements. As U.S. Treasury Secretary, he now Chairs the Financial Stability Oversight Council (F-SOC) which plays a key role in overseeing too-big-to-fail banks.
Rust Consulting, the firm serially mismanaging the payments to foreclosure victims, has its own Political Action Committee which is somewhat comically called the Rust Consulting “Administrative Excellence” PAC. Curiously, Rust Consulting is paying the claims for both the National Mortgage Settlement and the Independent Foreclosure Review settlement. Both settlements are under investigation by members of Congress and are riddled with deep conflicts of interest which have destroyed public trust in the process.
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